Trump trade polices a serious threat to Iowa economy

Iowa is on the front lines of the Trump administration’s burgeoning trade wars. What’s at stake? Last year Iowa sold agricultural products, advanced manufactured products, and other goods worth over $13.3 billion to international buyers. Canada, Mexico, Japan, and China were our largest customers.

After the U.S. imposed tariffs on steel from Canada and Mexico earlier this year, both countries slapped steep tariffs on American pork, causing exports and prices to slump--bad news for Iowa farmers. Even with expected help from the renegotiated NAFTA agreement (“USMCA”), Iowa farmers will suffer until the Mexican and Canadian tariffs are lifted.

The main theater of the trade war is China. The administration accuses China of unfair and illegal economic practices and imposed tariffs on $250 billion worth of Chinese imports. China has virtually stopped buying American soybeans and is shopping in Brazil. That action, combined with a bumper 2018 harvest, has driven soybean prices below the break-even point for many farmers. The administration promised $12 billion to farms harmed by the trade wars, but that’s a band-aid, not a solution.

Iowa’s industrial sector is also vulnerable. Last week a Chinese government regulator finally approved UTC’s acquisition of Rockwell-Collins. Chinese officials sat on the request for months, perhaps hoping to use the delay to pressure the U.S. on a dispute in the semiconductor industry.

Chinese student enrollment at Iowa’s regent universities dropped 13 percent over the past year, representing lost tuition revenue of $12 million. Foreign Policy reported in April that branches of the Communist Party of China were being established at the University of Illinois and elsewhere for “ideological monitoring and control.” If the bilateral relationship deteriorates further, Chinese students (our friends and neighbors) are likely to feel the heat.

Ambassador Terry Branstad in September warned that the Chinese were “now engaged in a sustained campaign to acquire our technologies and intellectual property through practices ranging from forced technology transfer and the evasion of export controls to outright theft through cyber-enabled means and traditional spycraft.” In October Senator Chuck Grassley noted that the U.S. government was “taking aggressive steps to right the wrongs perpetrated by China against the United States and put our nation back on an even playing field.” China’s ballyhooed Belt and Road Initiative (infrastructure loans to poor countries) is now derided as “debt-trap diplomacy” in some quarters.

Things could get worse before they get better. For decades American leaders believed in “convergence,” the notion that China would become more pluralistic, less repressive, and increasingly rules-based as it grew richer and better integrated into the international system. In Washington today, nobody believes in convergence.

The trade wars are partly a result of the Trump administration’s world view that the U.S. has been played for a chump and is shouldering more than its share of the cost of maintaining the international system. The president’s transactional approach to international engagement may win some battles, but it has eroded America’s soft power – our ability to wield influence due to the attractiveness of our values, behavior, and character.

Harvard’s Graham Allison in 2015 analyzed 16 historic cases in which “a rising power has confronted a ruling power.” The result in 75% of the cases? War. As China militarizes artificial islands in the South China Sea and the U.S. Navy regularly conducts “freedom of navigation” operations around them, an accident could escalate quickly. Bellicose tweets need to give way to clear-eyed diplomacy, alliance building, and patient resolve to promote and protect America’s interests and values. Is the Trump administration up to it? Despite the lack of precedent so far, let’s hope so.